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SEC Investigating SCO?
Udo Schmitz writes "As Groklaw reports, the SCO Group stated in a SEC filing from yesterday: 'In addition, regulators or others in the Linux market and some foreign regulators have initiated or in the future may initiate legal actions against us, all of which may negatively impact our operations and future operating performance.' Does this mean the SEC finally started to pull some stops? SCOs and Canopys financial dealings (Vultus acquisition anyone?) long ago lead to speculations in the Linux community about the legality of their business practices, or the whole lawsuit just being a stock scam."
I mean, seriously, at this point, who (other than investors) is going to be the least bit sympathetic?
"The party adjourned to a hot tub, yes. Fully clothed, I might add. -- IBM employee, testifying in California State Supreme Court"
:)
Relevant? I say yes
Doomie
There is another link I should've added to the submission: This site assembles some very interesting information from the Yahoo SCOX Financial Board.
In any event, the business was failing, so scam or not, it's a desperate game to try to stay alive and relevant for another few years.
The corporation's responsibility is working in the best interest of their shareholders - everything short of breaking the law in order to turn a profit for those who own stock. If that means suing a company just to stay relevant, so be it.
That's how public corporations work. It may not be morally correct (for some definition of morality), but they are responsible for protecting their shareholders... In the end, the trick may work the way they wanted - extending the life of a failing company for another few years so that shareholders have time to sell and salaried employees can collect a few more dollars.
Video Phone Blogs send video messages straight to the web.
Every corporation has malcontents among the shareholders.
It's the cost of raising capital through common stock.
They must have run out of money to buy off the key Congress critters. The rest belongs to Darth Darl.
have initiated or in the future may initiate legal actions against us, all of which may negatively impact our operations and future operating performance
/. posters.
Yea so what? Like you haven't cost other companies millions of dollars, hundreds if not thousands of man-hours, and that is not even to mention all the lost work hours from us
I hope you get sued into the ground.
I mod down so you can mod up. Your welcome.
They hold licenses to software. They don't actually develop anything. At one time, the original SCO wrote software, but the current SCO is nothing more than a software licensing house. Litigation is a major part of their business plan.
Many corporate actions are just games designed to artificially increase stock price.
SCO just happened to have the balls (or the incredibly stupid idea) to sue the 2nd largest software company in the world for an astronomical figure.
Consider this perspective. Even if IBM had rolled over and paid SCO some big number in a settlement, that wouldn't impact the company's value nearly as much as the potential of winning the huge case. So basically, the threat of the huge payoff, magnified by stock market gambling, would (and did) push the stock price up far more.
Everyone with inside information then cashes out (inside meaning executives, primary funding investors, and Martha Stewart-type friends) while the stupid general "investing" public buys more stock after reading the daily press releases.
.sigs are for post^Hers.
How come every time I hear about Canopy group in this case I cant help but thinking about the Umbrella Corporation? O.o;
while it's tempting to read more into it than is there, the fact is every corporation warns against a worst-case scenario in its financial filings to avoid shareholder suits down the road. LNUX and RHAT filings also contain similar template language, but no one anticipates they will go under in the next quarter.
This is absolutely no indication that there's a SEC investigation on the horizon and shows how really ignorant of standard business practices the Groklaw and anti-SCO folks really are. SCO is nicely imploding on its own; no reason to start a lot of false rumors (and speculating falsely about something that can effect stock prices is prosecutable, by the way; Ms. Jones should know that) when there's simply no need.
This exact language was in their 10-K filed last month. There have no other filings recently that would normally have a "Risk Factors" section, so that's why you wouldn't have seen this sort of language elsewhere. I don't think this is really news.
It is standard operating procedure to include in SEC filings discussion of any factors that will or reasonably may negatively impact business.
This CYA language is meant to prevent both SEC probing and shareholder lawsuits should something go wrong. This language is often copied verbatim in later filings, so it often is written to be as broad as possible.
Mere inclusion of such language does not mean that these factors have happened or will happen, only that the company thinks there is some non-zero chance of it happening.
Not surprisingly, SCO's language is pretty mushy here, but the wording, "have initiated or in the future may initiate" makes me believe that they're simply being prudent.
Of course, the fact that they feel the need to mention regulator investigation says a great deal about the company, regardless.
You know I didn't think anything would make me giggle like a little girl. I was wrong.
"Our stock price could decline further because of the activities of short sellers. Our stock has attracted the interest of short sellers. We believe the activities of short sellers have in the past and could in the future further reduce the price of our stock or inhibit increases in our stock price. " ha ha ha. Next on the Nature channel: How the activities of vultures and buzzards inhibit and reduce the activities an otherwise perfectly healthy wildebeest.
multifariam.net -- yet another nerd blog
Santa Clara Operations.
I believe that's Santa Cruz Operations.
I'd suggest that they really haven't even shown any flaccid, squishy evidence.
It's the sound of the world's tiniest violin, playing just for SCO.
Check out the prospectus of any publically traded company. It's completely normal to list just about every possible thing that could happen to the company negatively which would affect shareholder value. Think of it as "cover your ass" material.
Seriously, read the prospectus of a company you know and understand very well, such as a traditional retailer like Wal-Mart, Target, Borders, or Barnes and Noble. They'll list things like potential litigation, seasonal variances, competitors, natural disasters, affect of the institution of internet taxation on their business, etc., etc.
So, this is SCO's way of trying to prevent a class action suit by shareholders in the event that they are sued by companies/persons in the Linux community.
Canopy sued Microsoft and made a bundle without actually having to go to court. SCO was a Canopy company and both had Ralph Yarro as part of the organization.
It was reasonable to assume that if they sued IBM over its use of UNIX, that IBM would also cave in and give them a bundle of cash. Given what the lawyers have cost so far, it would have been cheaper. Oops, IBM didn't cave.
There are very serious issues involved in the SCO vs. IBM case which could have made many businesses worry about adopting Linux. IBM had bet the farm on Linux. IBM had no choice to fight.
Not only did SCO not have a leg to stand on but it seriously looked like they were perpetrating a fraud. Their only chance to stay out of jail is to make it look like they really believed their claims about IBM. SCO, therefore, had no choice but to fight to the bitter end.
What have we gotten out of this whole mess? Linux is unencumbered by anybody's copyrights. All doubt has been removed. The extra publicity may actually have promoted the uptake of Linux. We have gotten a wonderful legal education on Groklaw. We have been activated. A lot of people realize the importance of the next big fight (patents) and have started writing their congresscritters.
So, thank you SCO. Good luck staying out of jail.
SCO's management claimed that the stock sales (which you can find on their Form 4 filings with the SEC) were part of a pre-arranged sale plan that had absolutely nothing to do with the litigation. The sale plan was filed two months before the lawsuit was filed. That sure seems plausible to me.
I really hope someone nails these slimeballs.
(P.S. I've posted several notes on /. about this;
here's one from back in June 2003.)
I parse this to mean the statement is true if one or more of the conditions are true now or in the future. We know that 'others in the Linux market' are already suing (RHAT, NOVL). However, the statement as it stands doesn't say that SCO are being prosecuted NOW by regulators, but they may in future be prosecuted by regulators.
Therefore, I think the statement refers to the fact they are currently being sued by RHAT and NOVL, and might be prosecuted later by regulators (although this is not yet certain).
Oolite: Elite-like game. For Mac, Linux and Windows
Like an earlier post mentioned, it's Santa Cruz operation.
Also, it's important to note that the current SCO is not the same company as the SCO out of California. The current SCO is a group out of Utah that purchased the old SCO along with all of its IP.
The current SCO is purely an IP company. They have never developed software on their own, and should not be confused with the (much less evil) SCO of old.
If there's any group out there who is claiming that they are doing something that the SEC is going to have to investigate, they need to disclose the risk to make a shareholder lawsuit less likely.
If there is some risk that a company doesn't disclose, where there was some way for them to know that it was a posibility, they can be sued by shareholders if the stock goes down as a result of it comes true.
You often find really silly risks listed in safe harbor statement like that. For example, Walmart lists as a risk that they may not be able to buy from certain vendors if political instability takes place in their country. They also disclose that they won't do as well if they can't hire good employees.
Also, if they know about a SEC investigation or lawsuit against them, a company would usually give more information than that in a 10k (lest the SEC investigate them for the way they disclose their risks in their 10k).
Would you do it for some scoobie crack?
You're right about profitability but completely wrong about share price. Shares are initially issued to raise capital. After that it's a secondary market and they fight among themselves for how much the shares are worth. Profit not share price should be the determining factor for the corporation.
It used to be that the two were related, profit divided as dividends was the the primary motivation for determining share price - or the potential to control the company via the votes accrued. Now that it's all speculative - stockholders have hijacked the original purpose of the corporation which was a *business* to make money. This has led to SCO, HP, Nortel, Time Warner/AOL etc where short term decisions to help the stock price have resulted in long term harm to the corporation's viability and profitability.
I'm not saying that this is wrong either - but it really isn't very good for the economy overall when otherwise productive businesses are gutted to be made more appealing to the sucker buyer. The worst excesses (SCO, ENRON) should probably be punished. But there's not much that can be done about it as long as there are fools that want to get in on the sinking ship...
I think every single annual report I have ever read contains a very similar statement. The first time I saw it in my own company's report I freaked out, thinking that it referred to some specific, impending doom. A more senior business person clued me in that every company says that as protection (CYA, if you will), i.e. should they lose a lawsuit, they can claim that they already warned investors, stakeholders, et. al.
He looks up and with stunned shock you say, "Hey! Didn't you used to be Darl McBride"? ;P
/. I had to metamoderate!!!"
And then you start beating him with your laptop screaming "damn you and all those SCO stories on
-- If god wanted me to have a sig, he'd have given me a sense of humor.
We have been activated.
Wonder geek powers, activate! Form of: an 800lb. gorrilla! Form of: a tidal wave of litigation!
- None can love freedom heartily, but good men; the rest love not freedom, but license. -- John Milton
There is only one other company who's financial situation I followed the last years: AAPL. I just checked some of their SEC filings for similar sentences and: Nope, couldn't find anything like this.
Set anal probes to stun:
:) Just remember, the company bearing the name SCO is Caldera, a former puppet of the Canopy group, now running on McBride's and Yarro's egos alone. The original SCO is now soon to be a division of Sun, though it's not as if anyone even working there is from "the old SCO" either.
This is the second time I heard them called "Santa Clara Operations". It's "The Santa Cruz Operation". They were a joint venture with Microsoft to write a port of Unix System V to the 8086 and 8088. They called this port Xenix. Microsoft was supposed to pay SCO licensing for Xenix, but since they never used it, they figured they didn't have to pay SCO. SCO demanded rights to Xenix back, and got it.
For a while, SCO Unix sort of held its own on cost. The damn thing didn't even come with TCP/IP (you had to buy it from Excelan or another vendor) but once you got it up, you could run backoffice apps like order printing on the cheap, and it was reliable enough as long as you had a competent admin. They later grew into a bloated corporate entity with an increasingly shoddy product, but they had a moment in the sun. Later, the same company went on to produce products like Reflection (a rather good terminal emulator package, later sold off to WRQ and becoming Reflection X), and Tarantella, which was like VNC well before VNC. Tarantella was the most successful SCO product ever, and eventually SCO changed its name to match the product.
Tarantella sold off the name SCO to Caldera, a company whose history I know less of, except that they appear to be the working retirement package for Novell executives. Since Novell was going nowhere with their shiny new trophy -- the Unix name -- they sold it off to Caldera. Additionally, they bought the SCO name from Tarantella, who appeared more than happy to be rid of it. They started a not-terribly-well-received commercial Linux distribution, but also poured quite a lot of resources into free software development including KDE and various network utilities.
All was pretty happy for a while until a major shareholder, The Canopy Group then led by Ralph Yarro III, decided that this Linux thing wasn't really all that hot after all, and decided to kick Ransom Love out and replace him with Darl McBride -- another former Novell exec. McBride apparently agreed with Yarro that the demise of Project Monterey, a joint venture with IBM that scuttled SCO's prospects (that is, Caldera SCO, not Tarantella SCO) when it went away, meant that IBM had to pay, and pay hard, and that since they went with Linux, Linux had to pay too.
The rest you can read on Groklaw. I have to get back to work
I am no longer wasting my time with slashdot
Anyway, I don't foresee a serious SEC investigation until the lawsuit is settled. It would be a waste of resources to start an investigation when all that really needs to be done is to sift through the broken remants of a case. If a judge dismisses the case because SCO never had any more evidence than "It looks like UNIX so they must have copied it!" then I expect the SEC would crawl up SCO's ass with a microsope at that point.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
The Original SCO was known as The Santa Cruz Operation. They created the first x86 Unix called Xenix. In 1995 they obtain some sort of licensing from Novell. In 1998, they announced Project Monterey with IBM. They are now know as Tarantella but most of the business was sold to Cadera.
The SCO Group started as Cadera Systems and was split off from Novell in 1994. They were a Linux Distributor and was involved in the devolopement of the Red Hat Package Manager. In 2001 they acquire most of SCO includig rights to use the name. In 2002, Ransom Love leaves as CEO and Daryl McBride is named the new CEO. Later the name is changed from Caldera to the SCO Group, SCO for short. 2003 The IBM lawsuit is launched. SCO produces ever more ridiculous PR pieces. Eventually the mainstream press catches on that SCO is full of it (and I don't mean Information Technology).
Most of this available as a timeline from SCO
Just a Tuna in the Sea of Life
The problem with that is not "morality" (whatever that means for a business), but efficiency and effectiveness. Efficacy. Viability.
A company should exist to provide the best products it can to as many customers as it can. In the long run, that will provide the most return for shareholders. Be customer driven, not shareholder driven, and you will have both.
Trying to run the company to please the shareholders is like driving a car down the highway looking back in the rear view mirror. You may stay on the road, but be careful when passing, and those toll booths are really tough.
A business is only bound to stoop to whatever depths their bylaws and SEC filings say. When Google puts in their paperwork that they won't be evil (and they spell out what they mean), it allows them to make decisions based on morality and ethics as they define them. Prospective stock buyers are informed, and can't demand that Google be anything else.
Not that Google is the standard - I'm just using that as an example. It's possible to run a company within guidelines of good citizenship. Most executives would rather just take the money, it seems.
sigs, as if you care.
"LNUX and RHAT filings also contain similar template language[...]"
Just checked the last LNUX filing and found sentences like: "The Company is subject to various claims and legal actions arising in the ordinary course of business." I bet you'll find stuff like that in the filings of a lot of listed companies, but I didn't find mentions of "legal actions" "initiated" by "regulators".
I'll ignore your confusion over "Santa Clara" vs. "Santa Cruz", since several others have corrected you already. But the Santa Cruz Operation (now Tarantella, recently purchased by Sun) is a completely different company! This "SCO" is "The SCO Group". The "SCO" in their name doesn't stand for anything; their name is simply "The SCO Group".
This "SCO" was formerly known as Caldera, and they were originally formed to create a desktop environment (the "Caldera Network Desktop" or CND) for Linux. And they helped fund the creation of Red Hat, in order to have a stable base for the CND. Later, they decided to go their own way, and forked the Red Hat distro to make their own Linux distro ("Caldera OpenLinux"). Then they bought some assets (vague and unspecified, but definitely including the "SCO" trademark) from the Santa Cruz Operation, changed their name, started pretending they'd never heard of Linux before, and sued IBM.
Sure, it's a fun place to dig up speculative dirt, but that's all it is: speculation, and anyone who reads an SEC filing without this basic understanding of what he's actually looking at is... the kind of person who posts stories like this to Slashdot.
http://alternatives.rzero.com/
Didn't Caldera also buy the rights to DR-DOS from Novell and then sue Microsoft? If I remember correctly, it had somethig to do with the fact that Win 3.x displayed an "incompatible" error message when installing on top of DR-DOS vs. MS-DOS, I believe they won too (Caldera).
-Guns kill people like spoons made Rosie O'Donnell fat-
Once SCO actually sent legal complaints to IBM customers, they crossed a very big line. At that point, IBM went from wanting to win a case, to wanting to find out who was really behind the whole scam, and (metaphorically) stuff them in an agonizer booth for a year or so, then put their head on a pike, sew 100 year half-life radioactives over their once fertile croplands, pimp all their remaining family members, and recall the 1 dollar bill, so they could print up new ones with the idiot's picture on them, captiioned "Biggest loooozar evah in the whole history of the world". IBM doesn't want SCO, they want the whole Canopy group, and beyond.
The SEC will become involved at whatever time IBM thinks it is most efficient for them to become involved, and the first thing they will get to help them is copious evidence gathered by IBM's private investigators. Apparently, IBM has decided they have enough.
Without the trivial exaggeration of the first paragraph, and in all seriousness. This will end only after a dozen "mysterious suicides" and "accidents". Yes, real deaths. Some of the people who banked on SCO's claims got their start busting real people's real kneecaps over trivial 1,000 dollar loans. They are looking at financial losses, criminal prosecution, and in some cases this will be RICO based. Every single thing you have read here on Slashdot will look trivial as this ends up hitting the national press - Just be sure to read down, as by then the mentions of Darl, Canopy or SCO may be buried in the fourth paragraph or so.
Who is John Cabal?
Some time last year I got fed up with the irritation that is SCO. I got interested to see if the SEC was digging into what seems to be false claims on their part. It seems that the SEC does not offer any information publicly about ongoing investigations.
Since I didn't know what, if anything, was happening, I reported them to the SEC. I was shocked to get a call the NEXT DAY from a man who identifdied himself as an attorney with the SEC. We spoke for about 45 minutes. At the conclusion of the conversation, he indicated that he thought he understood my issues with them - their apparent lies, their seeming stock manipulation, etc but doubted that he could proceed without more specific information about how they knowingly lied to the public.
If sufficient evidence was produced, he seemed interested in protecting the public from abusive corporate officers. He was not satisfied with what I offered him.
Unless someone has subsequently provided more and better evidence than what I knew about as an interested observer, it is doubtful that the SEC proceeded.
I was displeased that I was unable to move them to action.
Regards,
Anomaly
But Herr Heisenberg, how does the electron know when I'm looking?
This is an important point, but it seemed obvious to me that the original poster merely didn't consider the terms of the GPL to be an "encumberance" (which, so long as you don't want to try to add additional restrictions to the rights granted to people that you redistribute to, they aren't really). I didn't get that the poster was trying to assert the Linux was public domain.
It's just a matter of semantics, but there is a difference between being "protected" and being "encumbered"...
Hacker Public Radio is our Friend
To be fair, the Yahoo financial boards are rife with spam, garbage, and deliberate misinformation.
Yep. And the only difference between a normal Yahoo board and the SCOX board in that respect is it is the pumpers who primarily spew the garbage and deliberate misinformation moreso than the dumpers. The board is mostly filled with noise.
And the site in your post merely notes a few hits from Caldera sites - that could very easily be a worker checking the message boards for clues about what's going on with SCO, not neccessarily any monitoring by SCO management.
As the person responsible for the site in question, I think there is a bit more there than that. In fact, the Caldera information is the least interesting page there and something I actually regret having posted.
Of more interest is the examination of a fund manager who had invested in SCO and how he reacted when the SCOForum 2003 code that SCO showed was shown to be utter bunk in under 24 hours. The story of how that fund manager acted and what happened to the shareprice is much more interesting than caldera.com webhits.
Or, there is my guess (informed by Yahoo SCOX discussion) on the early timeline--back in the summer and fall of 2002 before SCO went public with anything. I happen to think that Morgan Keegan was likely the entity that brought in both MS and Boies.
More recently, there is an interesting reverse merger related to a currently private Redmond, Washington based company that SCOX has at least a 10% ownership of. I suspect it is a backdoor attempt to get some money into SCO's coffers so they can continue a bit longer.
It is speculation and could very well be wrong--but it is also information I haven't seen anywhere else and is definitely not "spam, garbage, [or] deliberate misinformation."
Those are pretty big claims. Care to present any evidence (of your claims about the past)?
We have been activated.
... it is far, far stronger than the dark side of the stock manipulator.
Wonder geek powers, activate! Form of: an 800lb. gorrilla! Form of: a tidal wave of litigation!
Actually, if anyone remembers, it was the tidal wave of slashdot-expanded open source coders that got the SEC to force the Red Hat stock to be pulled out of the pockets of stock manipulators and reissued to the open source Friends and Family group of IPO stock.
So, don't underestimate the power of the good side of the geek
Trust the Geek, Luke.
-- Tigger warning: This post may contain tiggers! --
If that was so, they would have bought out SCO long ago. It would have been far quicker, simpler and cheaper than the legal road they've actually taken.
IBM, however, are smart enough to realise that if they do that then a hundred more SCOs will try their hands at getting bought out in the same way, with great profit for the executives. Therefore IBM have decided to show the world exactly what happens to asshats like SCO, in the hope that others will be deterred from trying the same in future.
If the legal option was available, IBM probably really would ask the judge to stick Darl's head on a spike over Traitors' Gate. They want everyone in the world to know what happens to people who ask IBM for danegeld.
Real Daleks don't climb stairs - they level the building.